NexPoint (NREF) Q1 2026 Earnings Transcript

Motley Fool Transcribing, The Motley FoolThu, April 30, 2026 at 4:07 PM UTC

0

Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Date

Thursday, April 30, 2026 at 11 a.m. ET

Call participants -

Executive Vice President and Chief Financial Officer — Paul Richards

Executive Vice President and Chief Investment Officer — Matthew Ryan McGraner

Need a quote from a Motley Fool analyst? Email pr@fool.com

Takeaways -

Net Income -- $0.42 per diluted share, down from $0.70, driven by mark-to-market declines on preferred stock and warrants, and a decrease related to consolidated CMBS VIEs.

Earnings Available for Distribution -- $0.43 per diluted share, compared to $0.41 in the prior period, showing a modest increase.

Cash Available for Distribution -- $0.58 per diluted share, up from $0.45, providing 1.16 times coverage of the $0.50 regular dividend paid.

Book Value per Share -- $18.96 per diluted share, a sequential decline of 0.3%, attributed to unrealized losses on preferred stock and warrants.

Q2 Guidance -- Earnings available for distribution expected at $0.43 per diluted share midpoint (range $0.38-$0.48); cash available for distribution at $0.54 midpoint (range $0.49-$0.59).

Debt Refinance -- $180 million of senior unsecured notes refinanced with a $242 million total return swap facility, priced at SOFR plus 375 basis points, with three-year term and a one-year extension option.

Incremental Deployment Capacity -- The new financing facility creates approximately $45 million of incremental capacity for pipeline deployment.

B-Piece Asset Sale -- FRAN 2017-K62 B-Piece sold to Mizuho at 92.7 (original purchase at 68.69), reinvested into HRR tranche at 18.5% yield, generating $0.46 per share of book value appreciation and is expected to drive $0.34 per share annual cash available for distribution accretion.

Portfolio Size -- 90 investments totaling $1.1 billion, allocated 39.4% multifamily, 35.9% life sciences, and 17.1% single-family rental, with smaller percentages in storage, marina, and industrial sectors.

Geographic Exposure -- 28.7% of collateralized assets in Massachusetts, with significant allocations in Texas, Florida, Georgia, California, and Maryland; exposure focused on Sunbelt and life sciences clusters.

Portfolio Credit Quality -- 81.2% of collateral is stabilized, with 59.9% loan-to-value and weighted average DSCR of 1.32x.

Debt Metrics -- $665.2 million in debt outstanding, weighted average cost 5.2%, weighted average maturity 0.8 years; secured debt collateralized by $571.3 million with 3.8 years average maturity.

Dividend Declaration -- Board declared a $0.50 per share dividend for 2026, consistent with the prior quarter.

New Investments -- Funded over $30 million on two loans, both paying monthly coupons in the mid-teens.

Summary

NexPoint Real Estate Finance (NYSE:NREF) emphasized the completion of a $242 million total return swap facility, replacing and upsizing its largest near-term debt maturity and increasing deployment capacity. Management highlighted a supply-driven recovery underway in the multifamily segment, supported by data on reduced construction starts and persistent demand fundamentals. The life sciences portfolio, notably the Alewife project, was described as demonstrating improving credit quality and leasing velocity, underpinned by AI-related tenant demand and recent lease signings. AI initiatives are being actively deployed across underwriting and portfolio monitoring, with expected efficiency and risk management improvements. The company indicated it is valued at a significant discount to book value and signaled future opportunistic buybacks as a capital allocation priority.

Management noted that "concessions are down by 50% from Q4" in multifamily properties, signaling firming fundamentals in that segment.

The Alewife life sciences project is now 71% leased, with the anchor tenant Lila Sciences occupying 245,000 square feet on a long-term lease and "options to expand."

The company described its exposure to advanced manufacturing at Holly Springs and Vacaville as benefiting from "tenant is a battery manufacturer for the Department of Defense," with management expecting loan repayment and exposure reduction within 12 months.

Self-storage assets outperformed the sector, with "occupancy in the low 90s near the top of the industry" and rent and NOI "materially ahead of the sector decline by almost 300 to 500 basis points."

Active investment pipeline includes $190 million across 11 deals—three closed, eight with executed LOIs—and an additional $275 million in pipeline opportunities across multifamily senior loans and CMBS pools.

Management stated, "Net debt to equity continues to run below 1x, among the lowest in commercial mortgage REIT space."

AI-driven credit and operational innovations are projected to "is a 50% reduction in underwriting cycle time." and to accelerate risk flagging and reporting efficiency.

Buybacks are reaffirmed as an accretive use of capital, supported by current pricing levels "meaningfully deep discount to book value of approximately $19 per share."

Industry glossary -

CMBS B-Piece: The most subordinated, highest-risk tranche in a commercial mortgage-backed security, often held by specialist buyers who assume first-loss risk in exchange for higher returns.

TRS (Total Return Swap) Facility: A derivative financing agreement where a lender receives a floating interest payment in exchange for providing capital; borrower benefits from leverage and flexibility versus traditional debt.

Re-REMIC: A secondary securitization process in which tranches from an existing mortgage-backed security are pooled and re-securitized to achieve specific risk-return or liquidity objectives.

DSCR (Debt Service Coverage Ratio): A metric expressing the ratio of property net operating income to debt service, used to assess the debt repayment capacity of real estate assets.

LOI (Letter of Intent): A preliminary, non-binding agreement outlining key terms prior to executing a formal transaction or contract, used in the context of pipeline dealmaking.

Full Conference Call Transcript

Paul Richards, executive vice president and chief financial officer, and Matthew Ryan McGraner, executive vice president and chief investment officer. As a reminder, this call is being webcast to the company's website at nrep.nexpoint.com. Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions, and beliefs. Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's annual report on Form 10-Ks and the company's other filings with the SEC for a more complete discussion of risks and other factors that could affect the forward-looking statements.

The statements made during this conference call speak only as of today's date and, except as required by law, NexPoint Real Estate Finance, Inc. does not undertake any obligation to publicly update or revise any forward-looking statements. This conference call also includes an analysis of non-GAAP financial measures. For a more complete discussion of these non-GAAP financial measures, see the company's presentation that was filed earlier today. I would now like to turn the call over to Paul Richards. Please go ahead, Paul.

Paul Richards: Thanks, Kristen, and good morning, everyone. I will walk through our quarterly results, cover the balance sheet, and provide guidance for Q2 before turning it over to Matt for a deeper dive on the portfolio and macro lending environment. For the first quarter, we reported net income of $0.42 per diluted share compared to $0.70 for Q1 2025. The decrease was driven by small mark-to-market declines on preferred stock and warrants, as well as a decrease in the change in net assets related to consolidated CMBS VIEs. Earnings available for distribution was $0.43 per diluted share in Q1 compared to $0.41 per diluted share in the same period of 2025.

Cash available for distribution was $0.58 per diluted share in Q1 compared to $0.45 per diluted share in the same period of 2025. We paid a regular dividend of $0.50 per share in the first quarter, which is 1.16 times covered by cash available for distribution. On 04/28/2026, the board declared a dividend of $0.50 per share payable for 2026. Book value per share decreased slightly by 0.3% from Q4 2025 to $18.96 per diluted share, primarily driven by unrealized losses on our preferred stock investments and stock warrants. Turning to new investments during the quarter, the company funded over $30 million on two loans; both pay a monthly coupon in the mid-teens.

I want to highlight what is, in our view, the most important development of the quarter and, frankly, of this week. We have successfully refinanced $180 million of senior unsecured notes that were maturing on May 1. We replaced those 5.75% fixed-rate notes with a new $242 million total return swap facility priced at SOFR plus 375 basis points with a three-year term and one-year extension option. This transaction does several things. First, it removes the largest near-term liability overhang on our balance sheet. Second, the floating-rate structure aligns with our floating-rate asset base and gives us refi optionality as the curve evolves.

Third, the upsizing gives us approximately $45 million of incremental capacity to deploy into our pipeline at the double-digit coupons we are seeing today. And fourth, the facility allows back-lever optionality on eligible positions, which expands our origination capacity without requiring additional unsecured note issuances. We engaged more than 20 counterparties across bank and nonbank channels to optimize the structure, and the SOFR plus 375 pricing came inside comparable mortgage REIT executions in the high-yield baby bond and term loan markets. Importantly, we did this without diluting common shareholders at a discount to book.

Combined with the $21 million we raised in our Series C preferred and the re-REMIC execution I will discuss in a moment, we head into the back half of 2026 with one of the cleanest, most flexible capital structures in the commercial mortgage REIT sector. Capital recycling and book value accretion: We executed a re-REMIC of our FRAN 2017-K62 B-Piece during the quarter. We sold the B-Piece to Mizuho at 92.7, having purchased it at 68.69 in 2021, and reinvested into the HRR tranche of the new structure at an 18.5% yield.

That single transaction generated $0.46 per share of book value appreciation, reduced repo financing by $75 million, and is expected to drive approximately $0.34 per share of annual CAD accretion going forward. This is the kind of execution that does not happen by accident, and it speaks to the value we extract from a portfolio of seasoned, well-constructed credit positions. Moving to the portfolio and balance sheet. Our portfolio is comprised of 90 investments with a total outstanding balance of $1.1 billion. Our investments are allocated across sectors as follows: 39.4% multifamily, 35.9% life sciences, 17.1% single-family rental, 3.9% storage, 0.6% marina, and 2.1% industrial.

Our fixed income portfolio is allocated across investments as follows: 19% CMBS B-Pieces, 22% mezz loans, 24.5% preferred equity investments, 15.6% revolving credit facilities, 10.1% senior loans, 4.2% IO strips, and 4.6% promissory notes. The assets collateralizing our investments are allocated geographically as follows: 28.7% Massachusetts, 17.6% Texas, 5.9% Florida, 4.9% Georgia, 5.2% California, and 4.7% Maryland, with the remainder across states with less than 4% exposure, reflecting our heavy preference to Sunbelt markets, with Massachusetts and California exposure heavily weighted towards life science. The collateral on our portfolio is 81.2% stabilized with 59.9% loan-to-value and a weighted average DSCR of 1.32x.

We have $665.2 million of debt outstanding with a weighted average cost of 5.2% and a weighted average maturity of 0.8 years. Our secured debt is collateralized by $571.3 million of collateral with a weighted average maturity of 3.8 years and a debt-to-equity ratio of 0.7x. Moving to our guidance for the second quarter. Earnings available for distribution: $0.43 per diluted share at the midpoint, with a range of $0.38 on the low end and $0.48 on the high end. Cash available for distribution: $0.54 per diluted share at the midpoint, with a range of $0.49 on the low end and $0.59 on the high end.

With that, I would like to turn it over to Matt for a detailed discussion of the portfolio and the current market environment.

Matthew Ryan McGraner: Appreciate it, Paul. I am excited to walk through another strong quarter for NexPoint Real Estate Finance, Inc., and to thank our team and our partners for executing in what continues to be a noisy macro backdrop, including and especially the exciting and accretive financing completed with Mizuho that Paul just mentioned. Now on to the verticals. On the residential front, this is where we have our largest exposure at roughly 56% of the portfolio between SFR and multifamily. We are now firmly in the supply trough that I have been describing on these calls for several quarters. The thesis is playing out. We are coming off of a record national multifamily supply cycle.

Net deliveries peaked at approximately 695,000 units in the trailing 12 months ended Q4 2024. For context, that compares to roughly 282,000 units of average annual deliveries since 2001. CoStar now forecasts 2026 deliveries to fall approximately 49% from their 2025 levels, with another 20% decline forecast for 2027. 2027 and 2028 forecasts have been revised down meaningfully from prior estimates as well. On the supply side, multifamily construction starts are running approximately 70% below their 2022 peak, and that is locking in a multiyear supply trough. On the demand side, the structural backstop has not changed.

The cost to own a home in our markets remains roughly three times the cost to rent, and there is no reasonable mortgage rate scenario that closes that gap quickly. Our on-the-ground leasing data is consistent with the inflection thesis. By putting it all together, we believe 2026 and 2027 will be meaningfully better than 2025 for residential operators and, by extension, for the residential debt collateral on our balance sheet. On life sciences, I want to spend a minute here because I know it is a sector that has attracted some discussion; I think the conversation deserves a little more nuance than it has been getting. Our exposure is concentrated, intentional, and increasingly de-risked.

Our Alewife project is now 71% leased, anchored by Lila Sciences, a pioneering AI and life science company, on a long-term lease for 245,000 square feet with options to expand. The active pipeline of RFPs, LOIs, and leases on the project today represents approximately 92% of the remaining vacant square footage. This is a high-conviction underwrite into a project where leasing momentum and credit improvement are visible in the data, not aspirational. An additional and increasingly relevant point I want to drive home is the demand funnel of our life science collateral has widened materially because of AI, not in spite of it.

AI companies need exactly the same purpose-built infrastructure that traditional lab tenants need: power density, cooling capacity, structural floor loads, ventilation, and vibration tolerances. They cannot retrofit older converted assets at any rent. They need the bones, and they will pay for the bones. Alewife is exactly that asset in the right submarket adjacent to MIT and the broader Cambridge cluster. Our life science exposure is not a generic bet on the sector. It is a concentrated bet on first-to-fill, infrastructure-grade assets in elite educational districts that are now also AI corridors. The credit profile of these assets is improving, not deteriorating, as the tenant universe widens.

Moreover, our capital is largely placed in the last 12 to 18 months at a reset basis that primes billions of dollars of equity versus loans originated in the go-go days of the post-COVID liquidity craze where capital was much less discerning. On to self storage. Storage is in the cyclical bottoming process. Industry-wide second quarter earnings for the public REITs were consistent with guidance and largely in line with sell-side estimates. Expectation for the full year is roughly flat, with flat revenue and 50 to 150 basis point declines in NOI. Supply remains muted also. According to the data, facilities under construction are less than 3% of existing supply; that is the equilibrium benchmark.

Forecasted deliveries over the next several years could be as low as 1% of existing stock, and combined with the difficulty of bank financing for new development, the cost of land and materials, and a higher-rate environment than the 2015 to 2020 development cycle, we expect supply discipline to persist and pricing power to return. Our NSP portfolio continues to outperform the industry meaningfully, with occupancy in the low 90s near the top of the industry, and rent growth and NOI performance materially ahead of the sector decline by almost 300 to 500 basis points. Moving to our pipeline.

Today, it consists of approximately $190 million of NexPoint Real Estate Finance, Inc. investment across 11 active deals, three closed and eight under executed LOI, plus an additional $275 million of structured product opportunities, specifically across multifamily senior loans and CMBS pools. These are real deals at real spreads. The pricing power remains very much in our favor for disciplined capital providers like us. The pipeline's blended return profile is well in excess of our cost of capital and the new TRS facility that Paul mentioned, which is already driving modest increases in CAD, which we expect to see continuing throughout 2026.

Before I close, I want to take a moment on something that I believe will be a meaningful differentiator for NexPoint Real Estate Finance, Inc. over the next several years. We are deploying AI across our underwriting, portfolio monitoring, credit risk, and operations functions, and we believe we are ahead of the commercial mortgage REIT peer group on this. On the underwriting side, we are piloting AI-assisted deal screening and diligence across CMBS, mezzanine, and preferred equity originations. The system ingests rent rolls, comps, and market data, and our target is a 50% reduction in underwriting cycle time. That means more deals are being evaluated, sharper credit work, faster execution, all without expanding headcount.

On the portfolio monitoring side, we are deploying always-on surveillance across all 92-plus investments. Machine-learning-driven signals on occupancy, rent growth, debt service coverage ratios, and sponsor health flag risk before it shows up in the financials. We believe this will result in earlier identification of watch list assets and meaningfully tighten the feedback loop between credit underwriting and portfolio surveillance. We are also building predictive credit models for borrower default probability, LTV stress paths, and loss given defaults. This reinforces our existing disciplined underwriting with data-driven early warnings. It does not replace our investment committee process.

In our operations and reporting, we are using generative AI to accelerate investor reporting, SEC filings prep, earnings supplemental drafting, and internal research, freeing our team for higher value analytical work. Our roadmap is the sequence foundation in Q2 and Q3 of this year, scale across the full portfolio by Q4, and full optimization throughout 2027. We expect this to translate into faster decisions, sharper risk management, and a more scalable platform for growth. A few closing points on capital and the balance sheet. Net debt to equity continues to run below 1x, among the lowest in commercial mortgage REIT space.

Advertisement

Combined with the re-REMIC execution that Paul just mentioned and the new TRS facility, we do indeed have the capital structure flexibility to be opportunistic on origination and on our own stock. Speaking of which, at current levels, we continue to trade at a meaningfully deep discount to book value of approximately $19 per share. To be clear, we view buybacks at this discount as an accretive use of capital, and you should expect to see us continue to buy back stock opportunistically alongside funding the pipeline I just walked through. Given our liquidity position and having successfully refinanced near-term maturities, the two are not mutually exclusive. Our Series C preferred programs continue to provide flexible, nondilutive capital.

Our book value is stable. Our dividend coverage is sound. Leverage is low, and the portfolio's credit profile is improving. That is a setup we feel very good about heading into 2026. To summarize, strong quarter on earnings and credit, a transformative refinancing on the liability side, a continuing supply-driven tailwind in the residential space, a de-risking and broadening demand picture in life science, a robust pipeline of accretive deployment, and an AI platform initiative that we believe will set NexPoint Real Estate Finance, Inc. apart over the coming years. As always, I want to thank the team here for their hard work, and now we would like to turn the call over to the operator to take your questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, to ask a question, please press the star button followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. One moment please for your first question. Your first question comes from the line of Jade Joseph Rahmani of KBW. Please go ahead.

Jade Joseph Rahmani: Thank you very much. Rates are trending higher year to date, and I was wondering what you think the impact to the CRE recovery outlook will be, particularly around multifamily as bridge loans taken out during the COVID years are up for maturity.

Matthew Ryan McGraner: Yes, it is a good question. What I can say is in terms of the last, I would say, four to six weeks with rates going up as a result of geopolitical tensions, the processes that we have seen that started prior to that time, in terms of the capital markets transactions both on loan sales and investment sales, have all continued without, I would say, material disruption. There have been, I would say, some slight walkbacks in terms of buyers underwriting a 5.5% all-in rate on a Freddie or Fannie agency, and then the 10-year moves against them, and so they will seek a little retrace.

So there is, I would say, a little disruption in the capital markets, but nothing that would halt it, and liquidity is still very, very plentiful on the multifamily side. And I think what is even more important than that is we, and I think the broader public REIT universe in the reporting yesterday and today, are really starting to see the fundamentals in the multifamily sector turn and firm up. Concessions are getting weaker. In our own portfolio, for example, concessions are down by 50% from Q4. All of that is offsetting, I think, any near-term interest rate rise as it relates to multifamily.

Jade Joseph Rahmani: Life science update has been quite impressive, and I was wondering if you could give some thoughts. Do you view the Alewife exposure as unique to NexPoint Real Estate Finance, Inc., or are you also seeing green shoots elsewhere in the portfolio? And then overall, do you view NexPoint Real Estate Finance, Inc.'s exposure as better than the market? One of the commercial mortgage REITs downgraded a loan to risk five and took a quite large reserve on that. They are also expecting an REO in life science and much of it is vacant in the sector, so just looking for some additional thoughts there.

Matthew Ryan McGraner: Yes, you bet. I think the important point on our project in Alewife is, again, it is brand new, it is purpose-built with incredible infrastructure. And the land that the asset is built on was assembled over years, three to five years; it was not just a spec build. It was very intentional and in the cluster submarket. I think that, for one, is unique. Our own investment in terms of the loan-to-cost is roughly 30%. That is our unique sponsor relationship there and the ability for us to provide capital at a time, like I said, in the last 12 to 18 months where there was literally no capital available in the life science sector.

So I think the loans that I have seen as well that you are referring to were, again, originated in a more speculative environment with more hope to lease, on the outskirts of the cluster markets where we have exposure. Cambridge and the Longwood and Fenway districts are going to be the first-to-fill locations, and we are seeing real depth in the project leasing in terms of demand coming out of big pharma and the venture space. I think the green shoots you could point to are the biotech index nearing cyclical highs, venture capital at a high since 2021, and then, again, the AI spend and the assets that AI needs just widen the demand funnel for our assets.

We are in the right locations where they want to be, and they have the critical infrastructure that is demanded by their compute and other real estate needs. So I do think we are different. I do think our exposure is different, and I think it is, again, more recent at a reset basis versus loans that were originated perhaps in 2020, 2021, and 2022.

Gabe Poguey: Hey, guys. Thanks for taking the question. I want to actually piggyback on what Jade was just asking. It sounds like Alewife is doing great. Some other exposures, you know, Holly Springs and Vacaville, California. You guys have low attachment points, but it looks like the senior mortgages are due maybe by the end of the year. Just any color you can give on expectations for the underlying asset, whether it is a refi or a sale, etc., I think would be helpful as it pertains to life science exposure away from Alewife. And then one more kind of just on the accounting side.

In the other income, the $17 million, can you guys break out the components of that for us before we get the 10-Q, or do we need to wait for the 10-Q for that?

Matthew Ryan McGraner: Great question, and thanks for it, Gabe. So Holly Springs and Vacaville are both advanced manufacturing assets, which, if anything, is stronger in the last six months than life science. The Holly Springs underlying collateral, I believe, is now topped out, has a tenant, and I think we will likely be refinanced out of that deal. The tenant is a battery manufacturer for the Department of Defense. They are seeing a ton of growth right now, and I see that exposure being reduced by a loan payoff at some point this year. Same thing goes for Vacaville. It has eight to 10 project names in and around both semiconductor manufacturing and advanced manufacturing in the pharmaceutical side.

To your point, the attachment is very low there, so I think there are a lot of ways to win, and I would say that we would probably be taken out of that asset in the next 12 months as well. And then one thing that is on the horizon that could be good and bad is Alewife being repaid. With the success of leasing there, going from zero to 71% leased, and the tenant quality and the clustering that is happening—like I said, there are RFPs and LOIs on that asset that almost get it to 100% full—we could see that capital come back to us in 12 months as well.

Paul Richards: Yes, hey, Gabe. Great question. I think we wait until the 10-Q for that one. It will give you a good breakdown of the other income, and we can provide a breakdown in the supplement as well going forward for better analysis.

Operator: There are no further questions at this time. And with that, I will now turn the call back over to the management team for final closing remarks. Please go ahead.

Matthew Ryan McGraner: Thank you again for everyone's participation this morning, and we look forward to speaking to you next quarter and providing another good update. Have a great day. Thanks.

Operator: Ladies and gentlemen, this concludes today's call. Thank you for participating. You may now disconnect your lines.

Should you buy stock in NexPoint Real Estate Finance right now?

Before you buy stock in NexPoint Real Estate Finance, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and NexPoint Real Estate Finance wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $496,797!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,282,815!*

Now, it’s worth noting Stock Advisor’s total average return is 979% — a market-crushing outperformance compared to 200% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.

See the 10 stocks »

*Stock Advisor returns as of April 30, 2026.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Original Article on Source

Source: “AOL Money”